Transamerica Ins. Co. v. Duro Bag Manufacturing Co.

The court holds that the pollution exclusion clause in a manufacturing company's insurance policy bars coverage for costs of cleaning up environmental damage at the Newport landfill in Kentucky. The court first holds that the district court did not err in deciding not to certify to the Kentucky Supreme Court the question of the meaning of the phrase "sudden and accidental" in the pollution exclusion clause. Resort to the certification procedure is most appropriate when the question is new and state law is unsettled, which is not the case here. And although Kentucky has not addressed the exact question at issue, it does have well-established principles to govern the interpretation of insurance contracts. The court also declines to certify the question itself. The court next notes that it has already interpreted the pollution exclusion clause under Kentucky law, including the "sudden and accidental" language, in United States Fidelity & Guaranty Co. v. Star Fire Coals, 856 F.2d 31 (6th Cir. 1988). There the court held that "sudden" has its everyday meaning,which includes a temporal element,and that the pollution exclusion clause applies to the release of pollutants taking place on a regular basis or in the ordinary course of business. The court holds that there is no meaningful distinction between Star Fire Coals and the present case. In both cases, the insured had deliberately discharged waste over a period of years. Thus, the court holds that the company cannot claim the protection of the "sudden and accidental" language, and that the district court correctly concluded that the pollution exclusion clause bars coverage in this case. Regarding the company's argument that the court should estop the insurer from relying on the pollution exclusion clause on the ground that the insurance industry deliberately misrepresented the clause's meaning to state regulators, the court declines to go behind the policy's face to examine its drafting history. Under Kentucky law, extrinsic evidence is not admissible to vary the terms of an unambiguous contract.